Who will compete with SpaceX? The last two and next two years.

[meekGee]

Motorola and Teledesic together were looking at launch rates that were comparable in the 1997 time frame.  Been there, bid those, business never materialized.

Not comparable; we're talking thousands vs. hundreds--and those being launched-owned-operated by a single provider.  That single owner-operator (e.g. SpaceX) will determine whether their business case closes; if no, they won't; if yes, they will.

Given that both Motorola and Teledesic had real money, or access to capital markets, it is very comparable.  At the peak, we were preparing to bid on thousands of spacecraft launches.  It is not at all clear that most or even many of the proposed constellations will fly, and I can almost guarantee that if they do,  they will be significantly scaled back in number of spacecraft.

The smart-phone revolution changed thing.  Demand for "Everywhere" data is nowhere like it used to be.  Self-driving cars will add to that, if not surpass it.

You are correct that the will was there, but the market wasn't.  It was mis-predicted.  They wanted to drive the change, but it turned out it was too early.

It required several technical iterations, and a driving force like Steve Jobs to make it happen.  Right now, the market is driving these constellations. There is demand for pervasive data, the only thing not 100% clear is how this demand will be met.

[AncientU]

The internet of things is projected by 2020 to have a population of 'users' that will be double the human population on the planet.  Not sure if this was a significant market in 1990s.

[Oli]

You are correct that the will was there, but the market wasn't.

The market was there, they just lost out to terrestrial alternatives.

No doubt though the demand for satellite broadband is and will be growing, because people in remote places want internet access.

[meekGee]

You are correct that the will was there, but the market wasn't.

The market was there, they just lost out to terrestrial alternatives.

No doubt though the demand for satellite broadband is and will be growing, because people in remote places want internet access.

They did, and rightly so.  Constellations don't make sense unless there's a certain baseload demand everywhere, which there now is.

Also, the internal cost for SpaceX to launch these satellites will be a small fraction of what it cost the constellations in the previous generation.

There are enough differentiators from the past  to make "copy pasting" Teledesic non-insightful

[envy887]

You are correct that the will was there, but the market wasn't.

The market was there, they just lost out to terrestrial alternatives.

No doubt though the demand for satellite broadband is and will be growing, because people in remote places want internet access.

They did, and rightly so.  Constellations don't make sense unless there's a certain baseload demand everywhere, which there now is.

Also, the internal cost for SpaceX to launch these satellites will be a small fraction of what it cost the constellations in the previous generation.

There are enough differentiators from the past  to make "copy pasting" Teledesic non-insightful

Case in point, Iridium said they wouldn't be able to make the NEXT constellation work without SpaceX launch prices.

[butters]

SpaceX is the only one of the LEO comsat constellation plays which demonstrates a clear understanding of the topology of the modern Internet. Sure, providing connectivity to end-users in remote locations is a significant niche market. But ISPs, content services, and cloud computing providers know that the major pain points on the Internet are the peering and backhaul networks which connect data centers, last-mile district hubs, and cell towers to each other. Verizon FIOS customers have fast Internet, and Netflix data centers have fast Internet, but Verizon customers can't always get fast access to Netflix.

The other thing that's changed over the past 20 years is that virtually all public-facing content services are fronted by a Content Delivery Network (CDN) which serves their content through geographically distributed storage nodes located at the "edge" of the network nearest to the consumers. An LEO satellite Internet venture which truly understands the modern Internet would have on their roadmap the capability for their constellation to function as a CDN, caching content which passes through one satellite and distributing it to other satellites (space-to-space) on demand.

Connecting remote users is small-ball compared to displacing massive players like Level3, Equinix, and Akamai. Most Internet users haven't even heard of these companies, but they loom large in the core of the Internet generating huge revenues. This is where the opportunity for disruption by space-based infrastructure offers the largest economic potential.

[envy887]

Because SpaceX has MUCH bigger plans than just launching 20 rockets a year. Try more like 200.

200 per year is simply fantasy.  Even 20 annually for more than a few years (as SpaceX clears its delayed backlog) is optimistic.

In all history only two launch vehicle families have managed to fly more than 20 times per year for any length of time:  R-7 (1960s-1990s) and Thor (1960s).  R-7 peaked at roughly 55 per year during the 1980s, but the payloads that drove that cadence (Cold War film return recon) are gone.  During this decade, all of the rockets in all of the world's countries combined have only managed an average of a bit less than 83 orbital attempts per year.

 - Ed Kyle

But Ed, when the R-7 had its run, according to your logic, that was pure fantasy too, since it's never happened before...

You need to learn from history, not just quote it.  If history teaches us anything, it is that scales of operation (in many fields) that seem fantasy, regularly become reality mere years later.  Not every time of course, but often enough that your sense of what's fantastical is a very poor gauge into the future.

SpaceX has an unprecedented launch system, unprecedented near term plans (constellation), and unprecedented ambitions (Mars).  If anyone can take the next step, it is them.

Yes, you need to learn from history too just as you instructed Ed. We've never seen 200 orbital launches worldwide. I think it was in the late 60s or early 70s when it approached 150, but to predict 200 launches by SpaceX in a year is just FANtasy

We've never seen a launch vehicle costing less than Soyuz with twice the payload before. Nevermind one that's mostly reusable. This is a step change in technology, and a lot of historical trends are about to get disrupted.

I don't think SpaceX will get to 200/yr with Falcon. Probably about 100 is possible. I have little doubt they will eventually get to 200+ per year with a fully reusable vehicle though.

[HMXHMX]

Motorola and Teledesic together were looking at launch rates that were comparable in the 1997 time frame.  Been there, bid those, business never materialized.

Not comparable; we're talking thousands vs. hundreds--and those being launched-owned-operated by a single provider.  That single owner-operator (e.g. SpaceX) will determine whether their business case closes; if no, they won't; if yes, they will.

Given that both Motorola and Teledesic had real money, or access to capital markets, it is very comparable.  At the peak, we were preparing to bid on thousands of spacecraft launches.  It is not at all clear that most or even many of the proposed constellations will fly, and I can almost guarantee that if they do,  they will be significantly scaled back in number of spacecraft.

Cost of capital was higher in the 90s.

And Motorola was a very stupidly run company, which is why its not around anymore in that form (NB my partner was brought in by Google to handle it's acquisition of Motorola and the execs involved where having fits with making it function in a reasonable way. A multiple year mess of a sorting process that is still going on.)

Both the market for services and the financial environment for building businesses to provide them are very different today.

HMX, have no idea where you get the idea that they're in any way similar. Completely different gambles/risks/rewards.

Past the next telecommunications cycle, many huge global businesses will vanish.

Well, I won't belabor the issue.  I'll just say that I am dubious about the SpaceX constellation's economic and technical feasibility.  At the same time, it is true that Elon knows how to raise vast amounts of capital for business models that would be regarded as fantasy by investors if proposed by anyone else.  The valuation that I am hearing for SpaceX's next capital raise is more than a bit mind-boggling by any metric – even a forward leaning one that prices in the constellation's existence.

Time will tell.

(Edit: concatenation)

[Coastal Ron]

Well, I won't belabor the issue.  I'll just say that I am dubious about the SpaceX constellation's economic and technical feasibility.

Well worth skepticism, and I say that as an ardent SpaceX fan. But if I don't understand a business case then I won't cheer for it.

At the same time, it is true that Elon knows how to raise vast amounts of capital for business models that would be regarded as fantasy by investors if proposed by anyone else.

No doubt helped by a very clear vision, and his history of returning lots of money to his investors. Still, expecting 100% success is not a good long-term strategy.

The valuation that I am hearing for SpaceX's next capital raise is more than a bit mind-boggling by any metric – even a forward leaning one that prices in the constellation's existence.

For a company that has revenue and is positioned to dominate their part of the market for at least a number of years, I'd say that so far their valuation has not been out of whack. Yet.

You must hang with a lot of the "right" people though if you are hearing numbers for their next raise being debated. I wonder if the Tesla Model 3 launch is something Musk can use to prove to potential VC's that he is getting better with his big bets?

[M.E.T.]

Well, I won't belabor the issue.  I'll just say that I am dubious about the SpaceX constellation's economic and technical feasibility.

Well worth skepticism, and I say that as an ardent SpaceX fan. But if I don't understand a business case then I won't cheer for it.

At the same time, it is true that Elon knows how to raise vast amounts of capital for business models that would be regarded as fantasy by investors if proposed by anyone else.

No doubt helped by a very clear vision, and his history of returning lots of money to his investors. Still, expecting 100% success is not a good long-term strategy.

The valuation that I am hearing for SpaceX's next capital raise is more than a bit mind-boggling by any metric – even a forward leaning one that prices in the constellation's existence.

For a company that has revenue and is positioned to dominate their part of the market for at least a number of years, I'd say that so far their valuation has not been out of whack. Yet.

You must hang with a lot of the "right" people though if you are hearing numbers for their next raise being debated. I wonder if the Tesla Model 3 launch is something Musk can use to prove to potential VC's that he is getting better with his big bets?

I don't see how Elon can raise significant further capital for SpaceX without giving up his controlling share - I think his ownership sits at 57% at the moment or something like that.

So, if he only has 6% shareholding to play with if he wants to retain 51%, then even if you value the company at $30bn (which no one probably would at this point in time), 6% of that would raise less than $2bn of capital. Hardly the type of money that would make a dramatic change to SpaceX's trajectory. Elon could pump that amount of money in himself, most likely, without diluting his SpaceX shareholding at all.

Elon simply cannot give up majority shareholding in the company, else his Mars dream - which is not a profit based motivation - is in serious jeopardy.

[Robotbeat]

I imagine it's more like a $50+ b evaluation, based on HMXHMX's comments on it being ridiculous.

$3-4b is very likely enough capital to develop a mini-ITS... (Assuming they stick with subscale Raptor, etc)

[HMXHMX]

Well, I won't belabor the issue.  I'll just say that I am dubious about the SpaceX constellation's economic and technical feasibility.

Well worth skepticism, and I say that as an ardent SpaceX fan. But if I don't understand a business case then I won't cheer for it.

At the same time, it is true that Elon knows how to raise vast amounts of capital for business models that would be regarded as fantasy by investors if proposed by anyone else.

No doubt helped by a very clear vision, and his history of returning lots of money to his investors. Still, expecting 100% success is not a good long-term strategy.

The valuation that I am hearing for SpaceX's next capital raise is more than a bit mind-boggling by any metric – even a forward leaning one that prices in the constellation's existence.

For a company that has revenue and is positioned to dominate their part of the market for at least a number of years, I'd say that so far their valuation has not been out of whack. Yet.

You must hang with a lot of the "right" people though if you are hearing numbers for their next raise being debated. I wonder if the Tesla Model 3 launch is something Musk can use to prove to potential VC's that he is getting better with his big bets?

I don't see how Elon can raise significant further capital for SpaceX without giving up his controlling share - I think his ownership sits at 57% at the moment or something like that.

So, if he only has 6% shareholding to play with if he wants to retain 51%, then even if you value the company at $30bn (which no one probably would at this point in time), 6% of that would raise less than $2bn of capital. Hardly the type of money that would make a dramatic change to SpaceX's trajectory. Elon could pump that amount of money in himself, most likely, without diluting his SpaceX shareholding at all.

Elon simply cannot give up majority shareholding in the company, else his Mars dream - which is not a profit based motivation - is in serious jeopardy.

I am just speculating, but I'll bet he has studied the "Facebook" example of creating two classes of shares, one with super voting rights that allows the founder to retain control even if the ownership in his hands is less than 50%.

As for valuation...we are in Fantasyland.  (Or at least Tomorrowland.)  But I'm not going to bet against him succeeding in the raise.

[M.E.T.]

One can also split up (or create newco's) corporation and offer shares in the new enterprise(s).

Yes, creating a subsidiary company for the satellite constellation project, and having SpaceX own say 60% of that subsidiary while having some venture capatalist own 40% of it would give said investor access to the potential billions of dollars the constellation is expected to earn, while not diluting Elon's control over SpaceX at all.

That might be the way to go.

EDIT

Of course, I would seriously consider rather going for debt financing, considering that you can deduct the interest on the debt for tax purposes, and you can then keep all of the profits of the venture for yourself, rather than having to pay it out as dividends to some investor.

If they really believe in their constellation so strongly, rather finance it with a few billion dollars of debt, and once the revenues start streaming in it should be a breeze paying it back. And in the meantime you get to deduct all of that interest when it comes to calculating your tax bill.

[Oli]

You are correct that the will was there, but the market wasn't.

The market was there, they just lost out to terrestrial alternatives.

No doubt though the demand for satellite broadband is and will be growing, because people in remote places want internet access.

They did, and rightly so.  Constellations don't make sense unless there's a certain baseload demand everywhere, which there now is.

Also, the internal cost for SpaceX to launch these satellites will be a small fraction of what it cost the constellations in the previous generation.

There are enough differentiators from the past  to make "copy pasting" Teledesic non-insightful

Case in point, Iridium said they wouldn't be able to make the NEXT constellation work without SpaceX launch prices.

Funny, because I recently did a little analysis, which suggests that launch costs only make up roughly 8% of the total Iridium NEXT costs.

Do you have a source for this statement?

[tvg98]

You are correct that the will was there, but the market wasn't.

The market was there, they just lost out to terrestrial alternatives.

No doubt though the demand for satellite broadband is and will be growing, because people in remote places want internet access.

They did, and rightly so.  Constellations don't make sense unless there's a certain baseload demand everywhere, which there now is.

Also, the internal cost for SpaceX to launch these satellites will be a small fraction of what it cost the constellations in the previous generation.

There are enough differentiators from the past  to make "copy pasting" Teledesic non-insightful

Case in point, Iridium said they wouldn't be able to make the NEXT constellation work without SpaceX launch prices.

Funny, because I recently did a little analysis, which suggests that launch costs only make up roughly 8% of the total Iridium NEXT costs.

Do you have a source for this statement?

"We tried to work with other launch vehicle companies but all were at least twice the cost of SpaceX and unaffordable based on the scope of the network we needed to launch," Desch said, adding that he remains focused on the future."

http://www.cnbc.com/2017/06/25/spacex-is-critical-to-iridiums-future-says-ceo-matt-desch.html

[Oli]

Case in point, Iridium said they wouldn't be able to make the NEXT constellation work without SpaceX launch prices.

Funny, because I recently did a little analysis, which suggests that launch costs only make up roughly 8% of the total Iridium NEXT costs.

Do you have a source for this statement?

"We tried to work with other launch vehicle companies but all were at least twice the cost of SpaceX and unaffordable based on the scope of the network we needed to launch," Desch said, adding that he remains focused on the future."

http://www.cnbc.com/2017/06/25/spacex-is-critical-to-iridiums-future-says-ceo-matt-desch.html

Thanks.

Well "unaffordable" is a relative statement I guess. Iridium did after all sign a backup launch agreement, so it is doubtful SpaceX enabled Iridium NEXT. Still, doubling the launch costs would certainly have eaten into their profit margins.

[philw1776]

Well, I won't belabor the issue.  I'll just say that I am dubious about the SpaceX constellation's economic and technical feasibility.

Well worth skepticism, and I say that as an ardent SpaceX fan. But if I don't understand a business case then I won't cheer for it.

At the same time, it is true that Elon knows how to raise vast amounts of capital for business models that would be regarded as fantasy by investors if proposed by anyone else.

No doubt helped by a very clear vision, and his history of returning lots of money to his investors. Still, expecting 100% success is not a good long-term strategy.

The valuation that I am hearing for SpaceX's next capital raise is more than a bit mind-boggling by any metric – even a forward leaning one that prices in the constellation's existence.

For a company that has revenue and is positioned to dominate their part of the market for at least a number of years, I'd say that so far their valuation has not been out of whack. Yet.

You must hang with a lot of the "right" people though if you are hearing numbers for their next raise being debated. I wonder if the Tesla Model 3 launch is something Musk can use to prove to potential VC's that he is getting better with his big bets?

I don't see how Elon can raise significant further capital for SpaceX without giving up his controlling share - I think his ownership sits at 57% at the moment or something like that.

So, if he only has 6% shareholding to play with if he wants to retain 51%, then even if you value the company at $30bn (which no one probably would at this point in time), 6% of that would raise less than $2bn of capital. Hardly the type of money that would make a dramatic change to SpaceX's trajectory. Elon could pump that amount of money in himself, most likely, without diluting his SpaceX shareholding at all.

Elon simply cannot give up majority shareholding in the company, else his Mars dream - which is not a profit based motivation - is in serious jeopardy.

I am just speculating, but I'll bet he has studied the "Facebook" example of creating two classes of shares, one with super voting rights that allows the founder to retain control even if the ownership in his hands is less than 50%.

As for valuation...we are in Fantasyland.  (Or at least Tomorrowland.)  But I'm not going to bet against him succeeding in the raise.

Bingo!  The non-voting class of shares is definitely a big part of any Musk SpaceX equity fund raising strategy.
(have a finance MBA in addition to an engineering degree)

Agree also with the internet subsidiary strategy mentioned.

[Tass]

I don't see how Elon can raise significant further capital for SpaceX without giving up his controlling share - I think his ownership sits at 57% at the moment or something like that.

So, if he only has 6% shareholding to play with if he wants to retain 51%, then even if you value the company at $30bn (which no one probably would at this point in time), 6% of that would raise less than $2bn of capital. Hardly the type of money that would make a dramatic change to SpaceX's trajectory. Elon could pump that amount of money in himself, most likely, without diluting his SpaceX shareholding at all.

Elon simply cannot give up majority shareholding in the company, else his Mars dream - which is not a profit based motivation - is in serious jeopardy.

Only about half of it would dilute Elons shares, the other shares dilute too. So they could raise about 12% of the valuation with Elon still maintaining control.

[AncientU]

Case in point, Iridium said they wouldn't be able to make the NEXT constellation work without SpaceX launch prices.

Funny, because I recently did a little analysis, which suggests that launch costs only make up roughly 8% of the total Iridium NEXT costs.

Do you have a source for this statement?

"We tried to work with other launch vehicle companies but all were at least twice the cost of SpaceX and unaffordable based on the scope of the network we needed to launch," Desch said, adding that he remains focused on the future."

http://www.cnbc.com/2017/06/25/spacex-is-critical-to-iridiums-future-says-ceo-matt-desch.html

Thanks.

Well "unaffordable" is a relative statement I guess. Iridium did after all sign a backup launch agreement, so it is doubtful SpaceX enabled Iridium NEXT. Still, doubling the launch costs would certainly have eaten into their profit margins.

When the head of the company says unaffordable, it isn't relative.

Your estimate of 8% lumped 15years of op expense in with the capital raise needed to get started.  These are completely apples and oranges as far as starting a venture are concerned.  $492M launch costs are 17% of the up-front capital needs; doubling those costs make launch 30% of the capital required.  Business case likely didn't close with higher launch costs.

Half of a billion dollars makes a huge difference to a private company.

[Coastal Ron]

I am just speculating, but I'll bet he has studied the "Facebook" example of creating two classes of shares, one with super voting rights that allows the founder to retain control even if the ownership in his hands is less than 50%.

As I recall Travis Kalanick of Uber is the most recent example of voting class stock being kept with a CEO, but unfortunately he has not become an example to replicate.

Overall if the new investors want Elon Musk to have more than 50% of the company, they will make the numbers work. But I don't know how important Musk keeping 50% of the company stock is to all involved.

As for valuation...we are in Fantasyland.  (Or at least Tomorrowland.)  But I'm not going to bet against him succeeding in the raise.

And I think Uber here too is "polluting the pool" for everyone (along with Theranos), since they raised massive amounts of money on the promise they could not only wipe out their competitors, but that they could transform fast enough to out run the coming changes to the market.

Aerospace moves a lot slower, so I think Musk could convince potential investors that the launch side of a space-based internet provider company would give them an advantage, but I think it's still an open question whether enough of the world wants/needs space-based internet service. Especially after Iridium upgrades their system to handle a lot of low-speed data needs.